WHAT ARGENTINA´S PRESIDENTIAL ELECTION REALLY MEANS / GEOPOLITICAL FUTURES

What Argentina’s Presidential Election Really Means

While resilient, it seems as though Argentine voters are reaching their limit. 

By: Allison Fedirka

Argentina held a presidential election on Sunday that could be considered a referendum on the national economy. 

Argentina abounds with natural resources and potential wealth, but economic mismanagement over the past few decades has left the country in dire straits, and most elected officials have been unwilling to pay the political cost of economic reform.

Yet there’s reason to believe circumstances are conducive to change. 

The coming demand for grains, natural gas and lithium could be just the opportunity Argentina needs to resuscitate its economy and root out structural problems. 

And Sunday’s election showed that an increasingly larger share of the Argentine population is open to a massive political shake-up if it means a chance at improved economic conditions.

Javier Milei is slated to be the next president. 

He won the second-round vote with 56 percent of support while his opponent, Sergio Massa, won 44 percent. 

However, in the lead-up to the election, the two candidates were neck and neck. 

Not a single poll showed either candidate winning 50 percent of the popular vote; in November, Milei’s highest projection was 48.6 percent, Massa’s 46.7 percent. 

In all but one poll, the differences in voter share ranged from 1.5 percent to 4 percent – well within the margin of error. 

And anywhere from 5 percent to 18 percent of voters said they were either undecided or would cast a blank ballot. 

In other words, Milei will lead a deeply divided country, a division that is reflected in the national legislature. 

The Massa-led Peronista coalition holds 34 of 72 Senate seats and 108 of 257 House seats. 

Milei’s party holds eight Senate seats and 37 seats in the House. 

Milei will therefore have to govern by coalition. 

More problematic is the dumpster fire that is the Argentine economy. 

Inflation is staggering. 

Prices in October were up 8.3 percent from the previous month, reaching an annual rate of 142.7 percent. 

In recent years, the central bank has repeatedly introduced higher-value currency notes to offset the damage, with the latest 2,000 peso note entering circulation earlier this year. 

International reserves were a paltry $20.98 billion a week before elections, and thanks to low crop yields this year, there is little hope that the country will get many more dollars anytime soon. 

The value of the peso, meanwhile, has plummeted from 176 to the dollar at the beginning of 2023 to 351 to the dollar last weekend. 

Making matters worse, the government in Buenos Aires has introduced nearly a dozen other exchange rates to control forex supplies, including for agriculture exports, credit card payments, earnings in U.S. dollars, small/medium-sized companies and depositing pesos in dollars abroad. 

(This is to say nothing of the uncontrolled, free-floating currency embraced by locals, called the blue dollar, which currently sits at around 900 to one U.S. dollar.)

Though bad, this isn’t exactly a new development. 

For most Argentines, the 2001 economic collapse remains the standard against which economic problems are measured. 

That year, peso-denominated bank accounts were reduced to a third of their value overnight. 

The country went through five presidents in two weeks, and menu prices at restaurants were written in pencil so they could be easily updated, sometimes daily. 

The country enjoyed a brief period of growth during the administration of Nestor Kirchner (2003-07) and in the early parts of his successor’s tenure, but the economy has been in steady decline for the past 15 years.

Argentine residents have proved resilient against the economic challenges they have regularly encountered. 

They’ve had to get creative to find ways to access, exchange and save dollars. 

Paying for goods, even groceries, in quotas is a common practice for consumers. 

But even these workarounds are harder to come by. 

Research from the Pontifical Catholic University of Argentina shows that nearly 40 percent of the population lives in poverty, while data from the country's national statistics agency, Indec, suggests that figure has surpassed 40 percent. 

Poverty rose 13.6 points in the past decade despite a social spending increase from 12.5 percent of gross domestic product to 17 percent. 

(If government welfare programs were removed, these figures would increase dramatically.)

The strong performance by Milei shows that the population may have reached its limit and that the country’s economic problems have finally led to a new political movement. 

To understand his rise, one must first understand traditional Argentine political dynamics. 

The Argentine electorate can be divided into three camps: rural voters, the urban working class and the business elite. 

Each group requires distinct economic policies that often conflict with the other. 

Contemporary politics derive from Peronismo, a political movement personified by Juan Peron, president from 1946 to 1955, and characterized by nationalist sentiment, an appeal to the urban working class, strong government support for the economy and a populist ideology. 

There have been many shades of Peronismo in the Argentine government since its initial introduction, and its ubiquity has resulted in a relatively weak opposition.

A shift in political dynamics slowly started in the early 2010s as the Argentine economy declined under Cristina Fernandez’s government. 

Voters looked to the opposition for a lifeline, ushering in opposition candidate Mauricio Macri in 2015. 

Macri enacted several dramatic changes to correct the Argentine economy, striking a major loan deal with the International Monetary Fund and implementing tough austerity measures. 

The political cost was high, and the benefits were slow to come. 

The Peronistas thus returned to power with the election of Alberto Fernandez in 2019. 

But he likewise failed to deliver solutions for the Argentine economy. 

The public was left disillusioned with its traditional political options.

Enter Milei, an anti-establishment politician who promised sweeping economic reforms and a redefinition of international relationships. 

His platform clearly breaks with the previous party paradigms and dynamics, calling for a “redemocratization” that includes adopting the U.S. dollar, dissolving the central bank, breaking ties with China, following free market principles and loosening firearm restrictions. 

He stands in stark contrast to Massa, who can best be described as a pragmatic Peronista who tries to balance ideology with political reality. 

He advocates judicious (rather than blanket) controls over trade and exchange rates and selective reductions in government spending while still doling out cash for social welfare programs and subsidies. 

He also squarely blames the Macri government’s IMF deal for the country’s current problems.

There were a variety of economic forces that allowed an out-of-the-box candidate like Milei to contend for power. 

But there also appears to be a generational divide influencing Argentine politics. 

The country became a democracy in 1983, and its economy completely collapsed less than 20 years later. 

Younger generations grew up with fundamentally different expectations from the government; depending on where they study, many support the idea of a freer market. 

These voters saw the shortcomings in the Macri and Fernandez administrations and are now looking for a totally new solution embodied by Milei. 

Young voters (16-35 years old) tend to favor him, while the oldest voting group (56 plus) favor Massa. 

These younger groups have spent most of their adult lives experiencing economic hardship, and Milei appears to be tapping into a middle-income group of economically disillusioned Argentines who have not benefitted from the status quo.

Also telling is the relationship between voters’ top issues and their confidence in a candidate’s ability to resolve those issues. 

Unsurprisingly, inflation is by far the most pressing concern for the Argentine electorate. 

According to a recent Atlas Intel poll, 78.3 percent of respondents ranked inflation among the country’s biggest problems right now. 

This was followed by corruption and insecurity at 45.7 percent and 36.2 percent, respectively. 

Nearly three-quarters of voters believe corruption and insecurity are on the rise. 

In the three most important areas to voters, Milei emerged as the candidate with the most voter confidence. 

But here, too, the polls demonstrate a divided population, nearly in half, with an emerging third group that did not have confidence in either candidate. 

In many ways, the most important aspect of the election is the emergence of a new political movement in the country that diverges dramatically from Peronismo and the traditional opposition. 

And it seems it will stick around so long as the country’s intractable, systemic economic problems do. 

Change is in demand, but the question is how the president-elect will use this political capital and how quickly he will work toward economic reform.